/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/250303.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Monday, March 3, 2025, Vol. 26, No. 44 Headlines A R G E N T I N A CHACO: Fitch Affirms 'CC' LongTerm Foreign & Local Currency IDRs ENTRE RIOS: Fitch Affirms 'CC' LongTerm Issuer Default Ratings SALTA: Fitch Hikes LongTerm Foreign & Local Currency IDRs to CCC- TELEFONICA SA: Milei to Review Firm's $1.25-Billion Argentina Sale B A H A M A S FTX GROUP: Jailed Former Exec's Lawyers Can't Drop From Ch.11 Suit B R A Z I L GOL LINHAS: US Trustee, Creditors Blast Plan Disclosure ROCKY MOUNTAIN IMPORTS: Seeks Cash Collateral Access E C U A D O R IMS ECUADORIAN 2021-1: Fitch Affirms 'CCC+sf' Rating on Cl. A Notes J A M A I C A JAMAICA: Fitch Affirms 'BB-' LT Foreign Currency IDR, Outlook Pos. JAMAICA: Producer Prices for Mining & Quarrying Dipped 1.2% in Jan. M E X I C O MEXICO: Trump Sows More Uncertainty About Tariffs P U E R T O R I C O BMF INC: Seeks to Hire Hector Eduardo Pedrosa Luna as Counsel - - - - - ================= A R G E N T I N A ================= CHACO: Fitch Affirms 'CC' LongTerm Foreign & Local Currency IDRs ---------------------------------------------------------------- Fitch Ratings has affirmed Province of Chaco's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) at 'CC'. Fitch has also affirmed Chaco's step-up USD262.6 million senior unsecured notes at 'CC'. The bonds are rated at the same level as the province's IDRs. Ratings at this level typically do not carry Outlooks due to their high volatility. Fitch relied on its rating definitions to position the province's ratings and Standalone Credit Profile (SCP). Chaco's SCP of 'cc' reflects Fitch's expectations that actual debt service coverage ratio (ADSCR) will remain below 1.0x in the next 12 months in Fitch's scenario horizon; however, this ratio is estimated to move slightly above 1.0x in 2026, if macroeconomic tailwinds prevail. The rating affirmation considers Argentina's recent rating upgrade to 'CCC' and eased macroeconomic conditions, such as less than expected inflation and real exchange appreciation. However, elevated uncertainty at home and abroad remain. Key Rating Drivers Risk Profile: 'Vulnerable' The 'Vulnerable' assessment, for all Argentine local and regional governments (LRGs), weighs the sovereign IDR below 'B' category rather than Argentina's implied operating environment of 'bb'. The risk profile therefore reflects Fitch's view of a very high risk of the issuer's ability to cover debt service with the operating balance weakening unexpectedly over the scenario horizon due to lower revenue, higher expenditure, or an unexpected rise in liabilities or debt-service requirements. Revenue Robustness: 'Weaker' The assessment reflects the complexity and imbalance of the national fiscal framework, dependence on 'CCC' sovereign counterparty risk for 84.4% (three-year average) of its total revenue, which mostly stems from national automatic co-participation tax transfers. Federal co-participation tax transfers are a very important component of subnational fiscal performance. At YE 2024, co-participation tax transfers showed an accumulated 196% annual nominal term growth but a negative 12% decrease in real terms. Fitch estimates that own-revenues could increase 190.4% for the same period, for a total operating revenue growth of 219.9%, amid a context of high inflation, where annual average was 237.2%. Revenue Adjustability: 'Weaker' Chaco's ability to generate additional revenue in response to possible economic downturns is limited, like all Fitch-rated Argentine LRGs. However, for Chaco this is further exacerbated by its high reliance on national automatic transfers. Tax revenue/total revenue averaged 11.6% between 2019-2023 (11.2% in 2023). Fitch considers local revenue adjustability low and challenged by the country's large and distortive tax burden. Structurally high inflation also constantly erodes real-term revenue growth and affects affordability. Chaco's weak socioeconomic indicators are below the national average and lag international peers, which also weighs on the assessment of this key rating factor. Expenditure Sustainability: 'Weaker' In Fitch's view, spending decentralization could continue to rise to fulfill Argentina's IMF Extended Fund Facility (EFF) fiscal targets. Fitch will monitor how the new agreement unfolds and impact the provinces' fiscal framework. Since 2017, the province has turned its margins from negative territory toward a positive operating balance averaging 16.8% from 2019-2023. For YE 2024 Fitch expects an operating margin of 16.5% and then decreasing towards 2.2% in 2026. Fitch expects margins will converge toward lower levels in the medium term given the lag effect that inflation tends to have on real-term wages. For 2025-2026, considering the unfunded pension burden, Fitch estimates opex will increase above inflation and will lower operating balance to 2.3% in 2025, hovering 2.2% towards 2026, below the 2020-2023 average of 18.9%. Budgetary risks remain from the growing pension deficit weight and salary pressures due to high inflation, weakening expenditure predictability. Expenditure Adjustability: 'Weaker' Fitch views Chaco's leeway or flexibility to cut expenses as weak relative to international peers, considering an average of only around 13.0% of consolidated provincial total expenditures going to capex from 2019 to 2023, which decreased to 15.2% at YE 2023 from 12.5% in 2022. Similar to other Argentine peers, the province has very high infrastructure needs; therefore, increasing capex does not necessarily translate into economic growth due to the important infrastructure lag, which also reflects minimal flexibility to adjust capex. Compared with international peers, Chaco has a high share of opex to total expenditure with an 83.5% average for the last five years. In 2023, staff expenses represented 52.5% of total expenses (five year-average 51.6%), which is high relative to international peers. Chaco's socioeconomic indicators are below the national average and further constrain its opex flexibility. Liabilities and Liquidity Robustness: 'Weaker' Direct debt increased by 256.3% in 2023 mainly due to currency depreciation, totaling ARS365.2 billion. As of 3Q24, the outstanding amount stands at ARS447.5 billion; approximately 78.8% of Chaco's direct debt is denominated in foreign currency and is unhedged, mainly in U.S. dollars, which is a rating risk in the current environment of high inflation and currency volatility. However, 65.9% of its total debt has fixed interest rates. The external market remains closed. Chaco completed its DDE on June 25, 2021. The debt restructuring provided some external debt service relief for the province until 2024, when capital repayments began. However, despite this relief, the 'CC' IDRs reflect challenges ahead that could hinder the province's repayment capacity. On the pension front, Chaco is among the provinces that did not transfer their pension scheme to the nation, thus when considering the weight of this additional burden, the operating balance stands at 9.2% (from 18.6%) in 2023. On Feb. 5, 2025, Chaco and the National Government signed 'Reciprocal Obligations Compensation Agreement (Convenio de Compensación de Obligaciones Recíprocas) that granted the total cancellation of Chaco's debt with the Trust Fund for Provincial Development. The amount of this debt reaches nearly ARS60 billion (13.4% of total outstanding debt as of 3Q24). Fitch will monitor the implementation of this agreement. Liabilities and Liquidity Flexibility: 'Weaker' Fitch perceives the Argentine national framework in place for liquidity support and funding available to subnationals as 'Weaker', as there are no formal emergency liquidity support or bail-out mechanisms established. Argentine provinces rely mainly on their own unrestricted cash for liquidity. Fitch expects total cash to progressively shrink towards 2025 due to outturns and capex outlays increasing above inflation. The province has been tapping the local currency capital market by issuing short-term treasury bills (letras) to cover seasonal cash imbalances on a regular basis as well as to cover debt service of their international notes. Chaco's short-term treasury bill program has increased to ARS140 billion in 2025 from ARS5 billion in 2022; in 2024 it stood at ARS80 billion. The context of economic downturn coupled with expenditure pressures would converge liquidity to structurally tight and weak levels in the short term. In fact, in 2024, the province required a cash-advancement from coparticipation transfers, signaling large liquidity needs. Financial Profile: 'aa' category Fitch, considering the current sovereign 'CCC' rating level, curtailment of the external market amid a volatile macroeconomic and regulatory context, is only projecting a rating case for YE 2025. Financial profile metrics are analyzed to evaluate Province of Chaco-specific debt repayment capacity and its liquidity position in the next 12 months. Under Fitch's rating case scenario for 2024-2026, Chaco's debt payback ratio (net adjusted debt to operating balance), the primary metric of the financial profile, will be below 5.0x in 2025 at 4.8x, which corresponds to a 'aaa' assessment; and it is offset by an estimated debt service coverage at 0.9x, which is at the 'b' assessment category. The overall financial profile score in the 'aa' category reflects an override for a significantly weaker debt service coverage ratio. In Fitch's rating case, the agency envisages a progressive reduction of the operating margin towards 16.5%-2.2%, incorporating tax collection growth below inflation against inflation-driven operating expenditure and considering the unfunded pension burden. The recurrent use of short-term treasury bills is explained by this spending pressures. Derivation Summary The 'cc' SCP results from the application of the Lower Speculative Grade of Fitch's International Local and Regional Government Rating Criteria. Fitch qualitatively assesses the city's risk of default, and the remaining margin of safety based on overall performance and guided by rating definitions. The 'cc' Standalone Credit Profile is derived from a 'Vulnerable' Risk Profile and a 'aa' financial profile score but also reflects very high levels of credit risk, including the risk that a default of some kind, on USD notes in the short term, appears probable. Consequently, in the next 12 months, Chaco could have significant refinancing risks and high liquidity risk accompanied by weak debt coverage metrics. The SCP also factors in national and international peer comparison, in particular province of Salta, province of Entre Rios, Province of Chubut, and city of Kharkov. Key Assumptions Qualitative Assumptions - Risk Profile: 'Vulnerable'; - Revenue Robustness: 'Weaker'; - Revenue Adjustability: 'Weaker'; - Expenditure Sustainability: 'Weaker'; - Expenditure Adjustability: 'Weaker'; - Liabilities and Liquidity Robustness: 'Weaker'; - Liabilities and Liquidity Flexibility: 'Weaker'. - Financial Profile: 'aa' category. - Support (Budget Loans): 'N/A' - Support (Ad Hoc): 'N/A' - Asymmetric Risk: 'N/A' - Rating Cap (Long-Term IDR): 'N/A' - Rating Cap (Long-Term Local Currency IDR): 'N/A' - Rating Floor: 'N/A' Quantitative Assumptions -- Issuer Specific In line with its LRG criteria, for an entity with base case financial profile indicating an SCP of 'b' or below, the base case analysis alone may be sufficient to evaluate the risk of default and transition for the debt. Therefore, in the case of Chaco, Fitch's base case is the rating case which already incorporates a very stressful scenario. It is based on 2019-2023 figures, updated figures as of 3Q24, and 2025-2026 projected ratios. The key assumptions for the scenario include: - Operating revenue average growth of 60% for 2024-2026; assuming growth below average inflation towards the medium term given the negative impact of revenue framework impositions in federal co-participation transfers; - Operating expenditure average growth of 73% for 2024-2026; assuming growth above average inflation towards the medium term to assume real term expenditure re-composition and unfunded pension burden; - Average net capital balance of approximately negative ARS292 billion during 2024-2026; - Cost of debt considers non-cash debt movements due to currency depreciation with an average exchange rate of ARS917 per U.S. dollar for 2024, ARS1,171 for 2025 and ARS1,806 for 2026; - Consumer price inflation (annual average % change) of 237% for 2024, 77% for 2025, and 38% for 2026; - Short-term debt: Treasury bills programme revolving annually at ARS140 billion. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Signs of deeper liquidity stress that could compromise debt repayment capacity, including evidence of increased refinancing risk in its local and foreign currency debt as well as any regulatory restrictions to access foreign exchange; - If there are indications of any credit event that reflects a near default situation including a DDE under Fitch's rating definitions. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Generating operating balances that maintain the estimated actual debt service coverage ratio above 1.0x, on a sustained basis under Fitch rating case projection horizon. - less reliance on short-term treasury bills as a consequence of sustained operating margins which would signal ease budgetary pressures. Liquidity and Debt Structure Chaco's step-up USD262.6 million senior unsecured notes (restructured in 2021) are rated 'CC'. The bonds are rated at the same level as the province's IDR. The notes started amortization payments in 2024 (payments are due in February 18 and August 18). February's payment was carried out using own-resources plus proceeds from short-term treasury bills (letras), signaling large liquidity needs. Total debt service from the province's senior unsecured notes will amount to USD74.0 million during 2025, deceasing to USD69.2 million in 2026 and USD64.3 million in 2027 before its maturity in 2028. Fitch will monitor the province's compliance with its debt obligations in the coming 12 months in a context of lower inflationary pressures, appreciation of the real exchange rate, and highly volatile institutional framework. Issuer Profile Chaco is located in the northeast region of Argentina and has a small, low value-added economy. The estimated population is around 1.2 million, less than 3% of Argentina's population. GDP per capita is estimated at USD8,506 in 2023 (below the national average of USD13,891), and the poverty rate is at 76.2% (national average: 52.9%) as per first semester 2024 official figures. The services (tertiary) sector represents 68.4% of the province's gross domestic product, followed by manufacturing and construction (secondary) sector at 10.4%, and the agriculture, fishing and mining at 21.2%. Cotton production is one of the most important commodities, followed by sunflower seeds, and soybean. Fitch classifies Chaco as a Type B LRG, as it covers debt service from cash flow on an annual basis. Summary of Financial Adjustments No material adjustments were made to figures reported by the province. ESG Considerations Chaco, Province of has an ESG Relevance Score of '4' for Rule of Law, Institutional & Regulatory Quality, Control of Corruption due to {DESCRIPTION OF ISSUE/RATIONALE}, which has a negative impact on the credit profile, and is relevant to the rating[s] in conjunction with other factors. Chaco, Province of has an ESG Relevance Score of '4' for Creditor Rights due to {DESCRIPTION OF ISSUE/RATIONALE}, which has a negative impact on the credit profile, and is relevant to the rating[s] in conjunction with other factors. The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Prior ----------- ------ ----- Chaco, Province of LT IDR CC Affirmed CC LC LT IDR CC Affirmed CC senior unsecured LT CC Affirmed CC ENTRE RIOS: Fitch Affirms 'CC' LongTerm Issuer Default Ratings -------------------------------------------------------------- Fitch Ratings has affirmed Province of Entre Rios' Long-Term Local- and Foreign Currency Issuer Default Ratings (IDR) at 'CC'. Ratings at this level typically do not carry Outlooks due to their high volatility. Entre Rios' Standalone Credit Profile (SCP) remains at 'cc'. The rating affirmation considers Argentina's recent rating upgrade to 'CCC' and eased macroeconomic conditions, such as less than expected inflation and real exchange appreciation. However, elevated uncertainty at home and abroad remain. Fitch relied on its rating definitions to position Entre Rios' ratings and SCP. Although Entre Rios' financial profile improved to 'bbb' from 'b', a default is probable in the next 12-months. Fitch expects the province's actual debt service coverage ratio (ADSCR) and liquidity coverage ratio to remain below 1x for 2025 and 2026 due to its low operating margins and persisting significant refinancing risks. KEY RATING DRIVERS Risk Profile: 'Vulnerable' The 'Vulnerable' assessment, for all Argentine local and regional governments (LRGs), weighs the sovereign IDR below the 'B' category rather than Argentina's 'bb' implied operating environment. Therefore, the risk profile reflects Fitch's view of a very high risk of the issuer's ability to cover debt service with the operating balance weakening unexpectedly over the scenario horizon due to lower revenue, higher expenditure, or an unexpected rise in liabilities or debt-service requirements. Revenue Robustness: 'Weaker' Entre Rios' revenue robustness is assessed as 'Weaker' and reflects its high dependence on federal transfers, which account for 62.4% (average for 2020-2024) of its operating revenues. These federal transfers are mostly automatic from the revenue-sharing regime (co-participaciones), which stem from a 'CCC'-rated sovereign counterparty. In YE 2024, these accounted for 61.7% of Entre Rios' operating revenues. Although federal revenue-sharing transfers have never been interrupted to provinces, during 2024 the government imposed relevant modifications (exemptions) that negatively affected the federal revenue-sharing resources. Additionally, in 2024 the country's GDP dropped by 4% and hyperinflation averaged 236.8%. In 2024, the province's national transfers decreased by 13.6%. This real drop in revenue-sharing and sharp decline in local taxes of 10.3% impaired the province's operating revenues, which declined by 12.6% in real terms. Revenue Adjustability: 'Weaker' For Argentine LRGs, Fitch views local revenue adjustability as low, and challenged by the country's large and distortive tax burden and high inflation that impacts affordability. The negative macroeconomic environment further limits the subnational's ability to increase tax rates and expand tax bases to boost local operating revenues. Structurally high inflation also constantly erodes real-term revenue growth and affects affordability. For Entre Rios, local taxes represented a low 19% of total revenues, on average, during 2020-2024. Expenditure Sustainability: 'Weaker' Argentine provinces have high expenditure responsibilities as the nation's fiscal program is structurally imbalanced in revenue expenditure decentralization. This is further exacerbated by the high inflationary operating environment, which weakens Entre Rios' control over total expenditure growth prospects. Currency depreciation also affects expenditure costs, such as capex projects. Additionally, the lagged effect that inflation tends to have on expenditures because of real-term wage adjustment expectations compounds the weakness of expenditure predictability, or sustainability in Fitch criteria terminology. Currency depreciation also negatively affects some expenditure costs. Entre Rios did not transfer its pension scheme to the national government, resulting in a pension burden that absorbs more than 10 percentage points of its operating margin. In 2024, Entre Rios' operating balance rose to 1.3% of operating revenue from 4.0% at YE 2023, due to a larger drop in operating expenditure compared to operating revenue (-16% yoy in real terms). Fitch expects Entre Rios's operating margin to remain similar in 2025 due to the province's fiscal discipline policy. Expenditure Adjustability: 'Weaker' From 2020-2024, staff expenses averaged 69.5% of total expenses, on average, limiting budgetary flexibility. In 2024, pensions expenses accounted for 25% of total expenditure. Fitch believes Entre Rios has limited flexibility to cut expenses compared to international peers, as only 4.9% of total expenditure from 2020-2024 was capex. Like other Argentine peers, the province faces very high infrastructure needs, which means increasing capex does not translate into economic growth due to infrastructure lags and flexibility to adjust capex. Liabilities & Liquidity Robustness: 'Weaker' Exposure to unhedged foreign currency debt is a significant weakness, exacerbated by a weak national framework for debt and liquidity, as well as an underdeveloped local market. Its assessment also considers the impact of the 'CCC' rated sovereign, which restructured its debt in 2020, limiting external market access for LRGs. On March 15, 2021, Entre Rios restructured USD517.5 million of foreign currency notes after a distressed debt exchange (DDE). The province created a sinking fund to cover 2023 debt service payments. However, in 2024, sharp depreciation eroded the sinking fund, making it insufficient for full debt service coverage, leading Entre Rios to seek local market financing. By YE 2024, the share of bank loan debt rose to 14.6% from 4.4% in 2023. For the first 2025 payment, the province took a new bank loan for ARS52 billion and used sinking fund resources. Fitch will monitor the province's debt compliance obligations over the coming 12 months, with the next principal bond payment due on Aug. 8th, 2025. Liabilities & Liquidity Flexibility: 'Weaker' Fitch believes the Argentine national framework for liquidity support and funding available to subnationals as 'Weaker', as there are no formal emergency liquidity support or bail-out mechanisms. Argentine provinces rely mainly on their own unrestricted cash for liquidity. At YE 2023 and YE 2024 Entre Rios' liquidity position worsened due to its strategy of covering USD notes debt service on time and financing deficits. In 2024, the liquidity coverage ratio fell to 0.3x, and the fiscal deficit reached approximately ARS40 billion. Financial Profile: 'bbb category' Entre Rios' financial profile improved to 'bbb' from 'b' due to a reassessment of the primary metric, the payback ratio, which improved to 'a' from 'b'. This improvement reflects the province's tight expenditure control in 2024 and better macroeconomic estimates, including inflation and FX rate. The profile also considers an override from the weakest score of 'b' for the actual debt service coverage ratio (ADSCR). Fitch expects the ADSCR metric and liquidity coverage ratio to remain below 1x for 2025 and 2026 due to low operating margins forecast for the province, significant refinancing risks and high liquidity risk, making a default probable in the next 12-months. Derivation Summary Entre Rios' 'cc' SCP is derived from a 'Vulnerable' Risk Profile and a debt sustainability score of 'bbb'. It also reflects its very high level of credit risk, including the risk that a default of some kind is probable. The SCP considers comparison with peers, including the Province of Chubut, Province of La Rioja, Province of Neuquen and Province of Chaco. Fitch does not apply any asymmetric risk or extraordinary support from upper-tier government. The rating is based on Fitch's rating definitions. Key Assumptions Qualitative Assumptions Risk Profile: 'Vulnerable' Revenue Robustness: 'Weaker' Revenue Adjustability: 'Weaker' Expenditure Sustainability: 'Weaker' Expenditure Adjustability: 'Weaker' Liabilities and Liquidity Robustness: 'Weaker' Liabilities and Liquidity Flexibility: 'Weaker' Financial Profile: 'bbb' Asymmetric Risk: 'N/A' Support (Budget Loans): 'N/A' Support (Ad Hoc): 'N/A' Rating Cap (LT IDR): 'N/A' Rating Cap (LT LC IDR) 'N/A' Rating Floor: 'N/A' Quantitative assumptions - Issuer Specific In line with its International Local and Regional Governments Rating Criteria for entities with a base case financial profile indicating an SCP of 'b' or below, the base case analysis alone is deemed to be sufficient to evaluate the risk of default and transition for debt. Therefore, in the case of Argentine LRGs, Fitch's base case is the rating case. Fitch's rating case is a through-the-cycle scenario, which incorporates a combination of revenue, cost and financial risk stresses. It is based on 2020-2024 figures and 2025-2026 projected ratios. The key assumptions for the scenario include the following: - Operating revenue average growth of 60.2% for 2025-2026; linked mainly to inflation and economic recovery; - Operating expenditure average growth of 60.3% for 2025-2026; according to fiscal discipline policy undertaken by the province amid a hyperinflation that subsides gradually. - Average capital expenditure/total expenditure low levels of around 2% tantamount to 2024 metric in spite of investment needs of the province, considering the significant pressure on staff expenses and pensions. - Cost of debt considers non-cash debt movements due to currency depreciation with an average exchange rate of ARS1,171.7 for 2025 (year end 1,563.4), and ARS1,806.9 for 2026 (year end 2,050.3); - Consumer price inflation (annual average % change) of 77.2% for 2025, 38.8% for 2026. Liquidity and Debt Structure Direct debt totaled ARS751.9 billion at YE 2024 with 81.7% foreign currency denominated. Total debt grew around 29%, with regard to 2023 due to currency depreciation. Hence, Entre Rios' fiscal burden ratio reached 8.3% at YE 2024. The province's notes started amortization payments in 2023 (payments are due on February 8 and August 8 every year through 2028). Issuer Profile The Province of Entre Rios has an exceptional geographic location and endowment of natural resources. It is located in the northeast region of Argentina, the heart of Mercosur. Entre Rios is next to the Province of Buenos Aires, the main market of production and consumption in Argentina. Its territory is suitable for livestock, while 53% of the province's surface is suitable for agricultural activity and agribusiness, which represent the core of the productive and exportation structure. Entre Rios exports mainly to Asia. The province's population, at 1.4 million, equals approximate 3.1% of Argentina's. Fitch classifies Entre Rios as a Type B LRG, as it covers debt service from cash flow on an annual basis. Rating Sensitivities Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Signs of deeper liquidity stress that could compromise debt repayment capacity, including evidence of increased refinancing risk in its local and foreign currency debt as well as any regulatory restrictions to access FX; - The ratings would be downgraded if there are indications of any credit event that reflects a near default situation. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - An improved operating balance that strengthens the actual debt service coverage ratio above 1.0x on a sustained basis, fueled by a containment in the operating expenditure front. ESG Considerations Entre Rios, Province of has an ESG Relevance Score of '4' for Rule of Law, Institutional & Regulatory Quality, Control of Corruption due to {DESCRIPTION OF ISSUE/RATIONALE}, which has a negative impact on the credit profile, and is relevant to the rating[s] in conjunction with other factors. Entre Rios, Province of has an ESG Relevance Score of '4' for Creditor Rights due to {DESCRIPTION OF ISSUE/RATIONALE}, which has a negative impact on the credit profile, and is relevant to the rating[s] in conjunction with other factors. The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Discussion Note There was an appropriate quorum at the committee and the members confirmed that they were free from recusal. It was agreed that the data was sufficiently robust relative to its materiality. During the committee no material issues were raised that were not in the original committee package. The main rating factors under the relevant criteria were discussed by the committee members. The rating decision as discussed in this rating action commentary reflects the committee discussion. Entity/Debt Rating Prior ----------- ------ ----- Entre Rios, Province of LT IDR CC Affirmed CC LC LT IDR CC Affirmed CC SALTA: Fitch Hikes LongTerm Foreign & Local Currency IDRs to CCC- ----------------------------------------------------------------- Fitch Ratings has upgraded the Long-Term (LT) Foreign Currency (FC) and LT Local Currency (LC) Issuer Default Ratings (IDRs) of the Province of Salta to 'CCC-' from 'CC'. Salta's Standalone Credit Profile (SCP) has also been raised to 'ccc-' from 'cc'. In addition, Fitch upgraded Salta's USD 357.4 million senior unsecured step-up notes due in 2027 to 'CCC-' from 'CC', which is at the same level of the province's LT FC IDR. The rating upgrades consider Argentina's recent rating upgrade and eased macroeconomic conditions, such as less-than-expected inflation and real exchange appreciation. These rating actions are based on Fitch's assessment that Salta has a Substantial Credit Risk, as indicated by an actual debt service coverage ratio (ADSCR) slightly above 1.0x for 2025 and 2026. The DSCR improved to above 1x in 2025 and 2026 (from the past year's review which was below 1x). The improvement is attributed to better operating margins for 2024 (as of October) and 2025 (estimated), driven by a significant real contraction in operating expenses of -20% and a strong currency appreciation observed in 2024 and expected in 2025. Both factors contribute to an enhancement in the entity's financial profile, which strengthened to 'aa' from 'b' for the forthcoming 12 to 24 months. Key Rating Drivers Risk Profile: 'Vulnerable' Fitch evaluated Salta's Risk Profile as 'Vulnerable,' reflecting the combination of six Key Risk Factors (KRFs) assessed as 'Weaker'. The 'Vulnerable' assessment for all Argentine local and regional governments (LRGs) weighs the sovereign IDR below the 'B' category, rather than Argentina's implied operating environment of 'bb'. This assessment reflects Fitch's view of a very high risk that the issuer may struggle to cover debt service if the operating balance weakens unexpectedly due to lower revenue, higher expenditures, or an unexpected increase in liabilities or debt-service requirements. Revenue Robustness: 'Weaker' Salta is highly dependent on federal transfers, which averaged 73.4% of operating revenue from 2019 to 2023, originating from a 'CCC' sovereign counterparty. These transfers are primarily automatic and come from the co-participation tax-sharing regime. By law, federal co-participation transfers have never been interrupted; however, in 2023, the government implemented tax exemptions that negatively impacted co-participating resources. In 2024, automatic revenue sharing registered a real decrease of 12.9% nationally, and in the province of Salta it was 13.2% as of October 2024. This real drop in automatic revenue sharing and the virtual elimination of discretionary transfers (as of October 2024, down 83.4% in real terms) are impacting the province's operating revenues, which are estimated to decline by 11.7% in real terms for 2024 in a context of structurally high inflation reaching 117.8% during 2024 (average 236.8%). The decline in federal revenue sharing (-12.9%) is partially offset by an estimated real decrease of 8.9% in local revenue collection, which has averaged only 26.5% of the province's operating revenues over the past five years. For 2025 and 2026, Fitch estimates a real recovery in automatic transfers, based on the reimposition of the income tax and expected economic growth of 3.9% for 2025 and 3.1% for 2026. Revenue Adjustability: 'Weaker' Fitch views local revenue adjustability for Argentine LRGs as low, challenged by the country's significant and distortive tax burden and high inflation that affects affordability. The weak macroeconomic environment further restricts the ability of subnationals to increase tax rates and expand tax bases to enhance local operating revenues. Salta's local taxes accounted for a low average of 26.5% of operating income from 2019 to 2023. Local tax revenue decreased by 10% year over year in real terms as of October 2024, with an estimated decline of 8.9% for the full year. There were no changes to local IIBB rates in 2024. In addition, the administration anticipates improved royalty dynamics from 2025, focusing on activities related to lithium and rare earths. Fitch will monitor their development, but as of October 2024 there is already a positive trend, with a year-over-year real increase of 15.1%. Expenditure Sustainability: 'Weaker' Argentine LRGs face high expenditure responsibilities amid structurally high inflation. The country's fiscal regime is imbalanced regarding revenue-expenditure decentralization, leading to Fitch's 'Weaker' assessment of expenditure sustainability. Fitch estimates that in 2024 Salta's operating balance was 11.2% of operating revenue, up from 2.0% at the end of 2023, and it is expected to decrease to 6.7% in 2025. This is occurring in a context of historically high inflation and a deteriorating operating environment at the national level, resulting in revenue and expenditure pressures. As of October 2024, the province's operating balance was 13%, up from 2.4% in October 2023, due to operating expenses decreasing by 22.8% year over year in real terms, significantly below the 13.4% real year-over-year decline in operating revenues. Fitch estimates that the margin will slightly deteriorate in 2025 and 2026, returning to historical levels of around 6%. During the period from 2017 to 2023, Salta experienced a real increase in salary expenditure, especially in 2023, which was an election year both provincially and nationally. However, since 2024 this growth has significantly slowed down. Budgetary risks remain due to rising expenditure pressures, although Salta is among the provinces that transferred its pension system to the national government and therefore is not pressured by pension deficits. Expenditure Adjustability: 'Weaker' Argentine subnationals face high infrastructure needs and expenditure responsibilities, with limited flexibility to reduce expenses. National capital expenditure is low and insufficient to shift the capex burden to LRGs. Fitch considers the province's flexibility to cut expenses to be weak compared to international peers. In 2023, staff expenses accounted for a high 64.1% of Salta's operating expenditure (opex), with opex making up approximately 89.5% of total expenditure. From 2019 to 2023, an average of only 6.9% of total expenditure was allocated to capex. As of October 2024, the capex to total expenditure ratio decreased to 4.7% from 7.6% in the same period in 2023, amid a nearly complete elimination of national capital transfers (a 95.2% decline in real terms). This meant that capital expenditure in 2024 was almost entirely funded with own resources. Looking ahead, the investment policy will depend on the availability of own resources or financing allocated for this purpose. Fitch will monitor the evolution of these variables. Liabilities and Liquidity Robustness: 'Weaker' Exposure to unhedged foreign currency debt is a significant weakness, exacerbated by a weak national framework for debt and liquidity, as well as an underdeveloped local market. Its assessment also considers the impact of the 'CCC' sovereign, which restructured its debt in 2020, thereby limiting external market access for LRGs. Salta faces increasing debt capital amortization from its USD 357.4 million senior unsecured step-up notes, which were restructured in February 2021. Total debt service for these notes was USD 79.8 million in 2024, rising to USD 110.2 million in 2025. Liabilities and Liquidity Flexibility: 'Weaker' Fitch perceives the Argentine national framework in place for liquidity support and funding available to subnationals as 'Weaker', as there are no formal emergency liquidity support or bailout mechanisms. National capital controls are another risk captured in the liquidity flexibility assessment, as the imposition of exchange regulations could ultimately affect LRGs' ability to fulfil their financial obligations. Argentine provinces rely mainly on unrestricted cash for liquidity. Fitch estimates that Salta's available unrestricted cash totalled ARS85.6billion at YE 2023. Financial Profile — 'aa' Category: The score reflects a 'aaa' primary payback ratio of 1.1x for 2025 under Fitch's rating case. Also, the financial profile factors in an override from the 'bb' ADSCR of 1.1x in 2025. In 2025, the province will have debt service payments of USD 135.4 million (considering debt in ARS and USD at Fitch's average exchange rate). The projected ADSCR for 2025-2026 has an average of 1.2x. Derivation Summary The 'ccc-' SCP results from the application of the Lower Speculative Grade of Fitch's "International Local and Regional Government Rating Criteria." Fitch qualitatively assesses the province's risk of default and the remaining margin of safety based on overall performance and guided by rating definitions. The 'ccc-' SCP indicates that Salta has a very high level of credit risk and a default of some kind appears probable, particularly if there are indications that a default or a distressed debt exchange is a real possibility in the next 12 months. Salta's SCP is derived from a 'Vulnerable' risk profile and a 'aa' financial profile score, but also reflects its substantial level of credit risk. The SCP also takes into consideration comparison with peers. The rating is based on Fitch's rating definitions. Fitch classifies Salta as a type B LRG as it covers debt service from cash flow on an annual basis. Key Assumptions Risk Profile: 'Vulnerable, Unchanged with Medium weight' Revenue Robustness: 'Weaker, Unchanged with Medium weight' Revenue Adjustability: 'Weaker, Unchanged with Medium weight' Expenditure Sustainability: 'Weaker, Unchanged with Medium weight' Expenditure Adjustability: 'Weaker, Unchanged with Medium weight' Liabilities and Liquidity Robustness: 'Weaker, Unchanged with Medium weight' Liabilities and Liquidity Flexibility: 'Weaker, Unchanged with Medium weight' Financial Profile: ''aa', from 'b' with Medium weight' Asymmetric Risk: 'N/A, Unchanged with Medium weight' Support (Budget Loans): 'N/A, Unchanged with Medium weight' Support (Ad Hoc): 'N/A, Unchanged with Medium weight' Rating Cap (LT IDR): 'N/A, Unchanged with Medium weight' Rating Cap (LT LC IDR) 'N/A, Unchanged with Medium weight' Rating Floor: 'N/A, Unchanged with Medium weight' Quantitative Assumptions — Issuer Specific Fitch's rating case is a through-the-cycle scenario, which incorporates a combination of revenue, cost and financial risk stresses. It is based on 2019-2023 figures and 2024-2026 projected ratios. The key assumptions for the scenario include: - All budgetary variables consider the information accumulated up to October 2024; - Operating revenue average growth of 98.1% for 2024-2026, assuming growth above average inflation for 2025 and 2026; - Operating expenditure average growth of 94.6% for 2024-2026, assuming growth above average inflation for 2025 and 2026; - Average capital expenditure/total expenditure levels of around 5.4%, below the 2019-2023 historical average of 6.9% due to the financing needs that the entity faces to sustain higher levels of investment; - Cost of debt considers non-cash debt movements due to currency depreciation with an average exchange rate of ARS 917.4 per U.S. dollar for 2024 (year end 1,030), ARS1,171.7 for 2025 (year end 1,563.4), and ARS1,806.9 for 2026 (year end 2,050.3); - Consumer price inflation (annual average percent change) of 237.2% for 2024, 77.2% for 2025, and 38.8% for 2026. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - The IDR could be lowered if Salta's estimated actual DSCR drops below 1.0x in tandem with a liquidity coverage ratio below 1.0x underpinned by lower operating margins and unrestricted cash, regardless of whether the payback ratio remains below 5x. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - If the ADSCR remains in line with projections above 1x, along with the sustainability of the operating margin, this could lead to structural and sustainable liquidity metrics in a scenario of less uncertainty. In addition, it should compare adequately with Argentine peers. Liquidity and Debt Structure By the end of 2024, debt had surged to ARS 452.2 billion, showing a decline of 4.2% in USD, continuing the trend from 2023 in which it fell by 16.2%. In local currency, it increased due to the nominal rise in the exchange rate. By the end of 2024, 74.2% of the province's debt was denominated in foreign currency and remained unhedged. Issuer Profile Salta is located in northwest Argentina. It has a small and weak local economy concentrated in the tertiary sector, with a heavy emphasis on social services and the public sector. Salta's economy corresponds to around 1.5% of national GDP. The province's population is estimated at 1.2 million, around 2.6% of the national population. Summary of Financial Adjustments Fitch's net adjusted debt corresponds to the difference between Fitch-adjusted debt and the LRGs' unrestricted cash. The latter corresponds to the level of cash at the end of the year, excluding cash that Fitch views as being earmarked for payables or restricted. This calculation is applied to historical and available information provided by the issuer. ESG Considerations Salta, Province of has an ESG Relevance Score of '4' for Rule of Law, Institutional & Regulatory Quality, Control of Corruption reflecting the negative impact of a weak regulatory framework and national policies have over the province, which, despite the rating upgrade, has a negative impact on the credit profile and is relevant to the rating in conjunction with other factors. Salta, Province of has an ESG Relevance Score of '4' for Creditor Rights, despite the province's compliance with the negotiated terms throughout 2021-2024, the 2021 DDE continues to weigh on its credit profile and debt coverage is expected to remain pressured, which has a negative impact on the credit profile and is relevant to the rating in conjunction with other factors. The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Prior ----------- ------ ----- Salta, Province of LT IDR CCC- Upgrade CC LC LT IDR CCC- Upgrade CC senior unsecured LT CCC- Upgrade CC TELEFONICA SA: Milei to Review Firm's $1.25-Billion Argentina Sale ------------------------------------------------------------------ globalinsolvency.com, citing Bloomberg News, reports that Argentina's President Javier Milei warned Telefonica SA that his government will review the phone carrier's plan to sell its local operations to Telecom Argentina SA for a possible breach of anti-monopoly rules. Telefonica signed and closed the $1.25 billion deal after more than three decades in the country, according to a regulatory filing, globalinsolvency.com relays. The Spanish carrier has been working since late 2019 to cut its exposure to Latin America, the report notes. Headquartered in Madrid, Spain, Telefonica SA operates as a telecommunications company. As reported in the Troubled Company Reporter-Latin America, Egan-Jones Ratings Company on January 7, 2025, maintained its 'BB-' foreign currency and local currency senior unsecured ratings on debt issued by Telefonica SA. EJR also withdrew the rating on commercial paper issued by the Company. ============= B A H A M A S ============= FTX GROUP: Jailed Former Exec's Lawyers Can't Drop From Ch.11 Suit ------------------------------------------------------------------ Vince Sullivan at law360.com reports that attorneys from Montgomery McCracken Walker & Rhoads LLP representing former FTX Trading executive Ryan Salame cannot yet withdraw as his counsel in an adversary case seeking the return of $99 million in company funds after a Delaware bankruptcy judge said he needed more information about the firm's difficulties in communicating with their incarcerated client. About FTX Group FTX is the world's second-largest cryptocurrency firm. FTX is a cryptocurrency exchange built by traders, for traders. FTX offers innovative products including industry-first derivatives, options, volatility products and leveraged tokens. Then CEO and co-founder Sam Bankman-Fried said Nov. 10, 2022, that FTX paused customer withdrawals after it was hit with roughly $5 billion worth of withdrawal requests. Faced with liquidity issues, FTX on Nov. 9, 2022, struck a deal to sell itself to its giant rival Binance, but Binance walked away from the deal amid reports on FTX regarding mishandled customer funds and alleged US agency investigations. SBF agreed to step aside, and restructuring vet John J. Ray III was quickly named new CEO. FTX Trading Ltd (d/b/a FTX.com), West Realm Shires Services Inc. (d/b/a FTX US), Alameda Research Ltd. and certain affiliated companies then commenced Chapter 11 proceedings (Bankr. D. Del. Lead Case No. 22-11068) on an emergency basis on Nov. 11, 2022. Additional entities sought Chapter 11 protection on Nov. 14, 2022. FTX Trading and its affiliates each listed $10 billion to $50 billion in assets and liabilities, making FTX the biggest bankruptcy filer in the US this year. According to Reuters, SBF shared a document with investors on Nov. 10, 2022, showing FTX had $13.86 billion in liabilities and $14.6 billion in assets. However, only $900 million of those assets were liquid, leading to the cash crunch that ended with the company filing for bankruptcy. The Hon. John T. Dorsey is the case judge. The Debtors tapped Sullivan & Cromwell, LLP as bankruptcy counsel; Landis Rath & Cobb, LLP as local counsel; and Alvarez & Marsal North America, LLC as financial advisor. Kroll is the claims agent, maintaining the page https://cases.ra.kroll.com/FTX/Home-Index The Official Committee of Unsecured Creditors tapped Paul Hastings as counsel, FTI Consulting, Inc., as financial advisor, and Jefferies LLC as the investment banker. Young Conaway Stargatt & Taylor LLP is the Committee's Delaware and conflicts counsel. Montgomery McCracken Walker & Rhoads LLP, led by partners Gregory T. Donilon, Edward L. Schnitzer, and David M. Banker, is representing Sam Bankman-Fried in the Chapter 11 cases. White-collar crime specialist Mark S. Cohen has reportedly been hired to represent SBF in litigation. Lawyers at Paul Weiss previously represented SBF but later renounced representing the entrepreneur due to a conflict of interest. =========== B R A Z I L =========== GOL LINHAS: US Trustee, Creditors Blast Plan Disclosure ------------------------------------------------------- Rick Archer at law360.com reports that Gol Linhas Aereas Inteligentes S.A. and the U.S. Trustee's Office are asking a New York bankruptcy judge to reject the Brazilian airline's Chapter 11 plan disclosures, saying they lack information on items ranging from claims releases to the company's post-bankruptcy equity value. About Gol Linhas GOL Linhas Aereas Inteligentes S.A. provides scheduled and non-scheduled air transportation services for passengers and cargo; and maintenance services for aircraft and components in Brazil and internationally. The company offers Smiles, a frequent-flyer program to approximately 20.5 million members, allowing clients to accumulate and redeem miles. It operates a fleet of 146 Boeing 737 aircraft with 674 daily flights. The company was founded in 2000 and is headquartered in Sao Paulo, Brazil. GOL Linhas Aereas Inteligentes S.A. and its affiliates and its subsidiaries voluntarily filed for Chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 24-10118) on Jan. 25, 2024. GOL Linhas estimated $1 billion to $10 billion in assets as of the bankruptcy filing. The Debtors tapped Milbank LLP as counsel, Seabury Securities LLC as restructuring advisor, financial advisor and investment banker, Alixpartners LLP as financial advisor, and Hughes Hubbard & Reed LLP as aviation related counsel. Kroll Restructuring Administration LLC is the claims agent. ROCKY MOUNTAIN IMPORTS: Seeks Cash Collateral Access ---------------------------------------------------- Rocky Mountain Imports, LLC asked the U.S. Bankruptcy Court for the District of Colorado for authority to use $573,328 of cash collateral and provide adequate protection, from February 22, 2025, to August 1, 2025. The Debtor needs to use cash collateral for working capital, including inventory purchases, payroll, and marketing. The Debtor filed for bankruptcy due to financial struggles caused by employee layoffs, decreased sales, poor purchasing decisions, and high debt obligations. The company has two secured creditors: Live Oak Bank, with a $988,328 claim, and Peak Imports, with a $220,000 claim. The Debtor proposes to provide adequate protection by continuing operations and creating new receivables, as well as offering replacement liens to secured creditors to protect their interests. The Debtor also requests permission to vary the budget by 15% or 20% in certain categories and to carry over unused funds for future weeks. If revenues exceed projections, the Debtor proposes to allocate excess funds to cover cost of goods sold and related expenses. A copy of the motion is available at https://urlcurt.com/u?l=eqLfLc from PacerMonitor.com. About Rocky Mountain Imports Rocky Mountain Imports, LLC, doing business as Pikes Peak Rock Shop, is a direct importer and wholesale distributor of minerals, fossils and jewelry. Its customers include national parks, museums, gift shops, multi-store chains, science and nature shops, rock & gem shops, trading posts and local rock-hounds. The company directly imports from Brazil, Peru, China, Morocco, and India, and distributes its products to businesses across the U.S. and Canada. Rocky Mountain Imports sought protection under Chapter 11 of the U.S. Bankruptcy Code (Bankr. D. Colo. Case No. 25-10311) on January 21, 2025, with $96,089 in assets and $1,800,938 in liabilities. Gary Greenwald, managing member of Rocky Mountain Imports, signedU+0020the petition. Judge Michael E. Romero oversees the case. Kevin S. Neiman, Esq., at the Law Offices of Kevin S. Neiman, PC, represents the Debtor as bankruptcy counsel. ============= E C U A D O R ============= IMS ECUADORIAN 2021-1: Fitch Affirms 'CCC+sf' Rating on Cl. A Notes ------------------------------------------------------------------- Fitch Ratings has affirmed the IMS Ecuadorian Mortgage 2021-1 Trust certificates at 'AA+sf'. The Rating Outlook is Stable. Fitch has also affirmed the series A notes issued by Fideicomiso Mercantil Titularizacion Hipotecaria de Banco Pichincha 5 (FIMEPCH 5) at 'CCC+sf'. Entity/Debt Rating Prior ----------- ------ ----- IMS Ecuadorian Mortgage 2021-1 Trust 2021-1 44970EAA1 LT AA+sf Affirmed AA+sf Fideicomiso Mercantil Titularizacion Hipotecaria de Banco Pichincha 5 A4 LT CCC+sf Affirmed CCC+sf KEY RATING DRIVERS FIMEPCH 5 Rating Capped at Transaction Account Bank: The series A notes are capped at the rating of the Transaction Account Bank provider (currently Banco Pichincha, CCC+). For the 'Bsf' rating category, the Transaction Account Bank must have at least the same rating as the notes, according to Fitch's "Structured Finance and Covered Bonds Rating Criteria". However, in this case, the eligible bank has been defined as an entity with a rating equal to or maximum one notch below Ecuador's 'CCC+' sovereign rating, which constrains the ratings. Stable Pool Characteristics: Pool characteristics have remained similar since issuance. As of December 2024, Fitch has updated the weighted average foreclosure frequency at base case to 10.0% from 9.2% from last review, as a consequence of marginal delinquency and defaults increase, and weighted average loss given default to 13.8% from 8.0%. The higher loss given default is explained by Fitch's revision in August 2024 of the peak-to-trough house price decline (HPD) assumptions for Ecuador and, consequently, the current-to-trough HPD assumptions, given house price decrease in the past few years. The updated assumptions consider a performance adjustment of 0.9, given that the positive historical performance relative to current originator's assumptions. These assumptions consider the stability of the asset's main characteristics: average original loan-to-value of 62.5%, assets original term averaging 18 years, remaining term averaging 12 years, and 30.4% of the portfolio concentrated in properties valued equal to or less than 300 minimum wages at origin. As of December 24, on a cumulative basis, just 59 loans (1.7%) reached 180 dpd, while Fitch's initial assumption for the same period was 4.1%. Only 13 loans (0.4%) have been restructured. Adequate Capital Structure Supports Ratings: The series A notes benefit from a sequential pay structure, where their target amortization payments are senior to interest and principal payments on the series B notes. Series A also benefits from credit enhancement (CE) of 23.9% as of December 2024, higher than 18.2% in January 2024, and an interest reserve account equivalent to 3x their next interest payment. Although they benefit from excess spread, due to their net weighted average coupon feature, Fitch does not consider this variable in its analysis. Operational Risk Mitigated: Pursuant to the servicer agreement, Banco Pichincha performs the role of primary servicer. Fitch has reviewed Banco Pichincha's systems and procedures and is satisfied with its servicing capabilities. Additionally, Corporacion de Desarrollo de Mercado Secundario de Hipotecas CTH S.A. (CTH) has been designated as master and back-up servicer, mitigating the exposure to operational risk. IMS Ecuadorian Mortgage 2021-1 Trust DFC Credit Quality Supports Rating: The rating assigned to the 2021-1 certificates is commensurate with the guarantee provider's credit quality. The DFC's credit quality is directly linked to the U.S. sovereign rating (AA+/F1+/Stable), as guarantees issued by, and obligations of, the DFC are backed by the full faith and credit of the U.S. government, pursuant to the Foreign Assistance Act of 1969. Reliance on DFC Guaranty: Fitch assumes the payment on the notes will rely on the DFC guaranty. Through this guaranty the DFC will unconditionally and irrevocably guarantee the receipt of proceeds from the underlying notes in an amount sufficient to cover timely scheduled interest amounts (currently A4 interest rate minus trust expenses and 3.4%) and the ultimate principal amount on the certificates. The DFC guaranty effectively protects noteholders, taking into consideration the scope of the guaranty, the claim process and the timing required for the guarantor to disburse the funds to the issuer. Ample Liquidity: The transaction benefits from liquidity, in the form of a five-day buffer between payment dates on the underlying notes and payment dates on the certificates. Additionally, the certificates benefit from a three-month debt service reserve account at the underlying note level and a guaranty fee reserve account that was funded at transaction closing. This will be utilized throughout the life of the certificates to ensure the guaranty fee due to the guarantor is paid in a timely manner. Fitch considers this sufficient to keep debt service current on the guaranteed certificates until funds are received under a DFC Guaranty claim and that the guaranty will not terminate as a result of a failure to pay the guaranty fee. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade For the RMBS transaction, the ratings are sensitive to the Ecuadorian sovereign's country ceiling, as well as Banco Pichincha's (acting as the transaction account bank holder) credit quality. A downgrade of Ecuador's Country Ceiling to levels below the transaction current rating or a downgrade of Banco Pichincha would result in a downgrade of the series A notes. Considering the performance of the collateral observed and the increased OC levels, Fitch doesn't expect any negative rating actions based on asset's performance. For IMS Ecuadorian Mortgage 2021-1 Trust, the certificates' rating is directly linked to the credit quality of DFC, the guaranty provider. The DFC's credit quality is directly linked to the U.S. sovereign rating, as guarantees issued by, and obligations of, DFC are backed by the full faith and credit of the U.S. government, pursuant to the Foreign Assistance Act of 1969. The rating could be downgraded if the U.S. sovereign rating is downgraded. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade The ratings assigned to the class A notes issued by FIMEPCH 5 are sensitive to the credit quality of the Ecuadorian sovereign, as well as to the credit quality of Banco Pichincha (acting as the transaction account bank holder). An upgrade of Banco Pichincha, or the replacement by another entity with a higher rating, could result in an upgrade of the series A notes. For IMS Ecuadorian Mortgage 2021-1 Trust, the certificates could be upgraded in the case of an upgrade on the U.S. sovereign rating, as it could affect the credit quality of DFC. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS The credit quality of the Series A notes is currently capped at and driven by the rating of the Transaction Account Bank, Banco Pichincha, as measured by its Long-Term IDR. ESG Considerations The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. ============= J A M A I C A ============= JAMAICA: Fitch Affirms 'BB-' LT Foreign Currency IDR, Outlook Pos. ------------------------------------------------------------------ Fitch Ratings has affirmed Jamaica's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB-'. The Rating Outlook is Positive. Key Rating Drivers Ratings Fundamentals, Continued Positive Outlook: Jamaica's 'BB-' ratings reflect stronger governance than the peer median, significant progress with debt reduction, a sound fiscal framework and a strong political commitment to deliver large primary surpluses. Debt-to-GDP has fallen to a forecast 70.8% in fiscal 2024/2025 from a high of 135.3% of GDP in fiscal 2012/2013. The ratings remain constrained by deep structural weaknesses including subdued growth potential owing to a high crime rate, low productivity and weak demographics, and vulnerability to external shocks including weather-related. The Positive Outlook reflects Fitch's expectation of continued improvement in debt metrics and further strengthening of the policy framework over the next few years, including climate risk mitigants. Large Primary Surpluses: Despite the economic downturn last year caused by Hurricane Beryl and extensive rain in the fall, Fitch forecasts that the overall surplus in the fiscal year ending in March 2025 will be slightly better at 0.3% of GDP than fiscal year 2023/24 at 0.0% of GDP. This is in part due to one-off revenues from insurance payments as well as concession proceeds from airports. The primary surplus will shrink to 5% of GDP in fiscal 2024/25 from 5.7% of GDP in fiscal year 2023/24. Revenues are forecast to grow by 9% yoy driven by improvements in tax administration as well as continued labor market strength that drove consumption and tax revenues. Expenditure growth is being driven by a large increase in the public sector wage bill which has grown by nearly 50% over the last three years, although part of this increase is due to the reclassification of certain personnel allowances in program expenditures to wages. Fitch projects a balanced budget in FY25/26 moving to a deficit of nearly 1% of GDP in fiscal 2026/27, which would still be in line with reaching the government's debt target of 60% on time by fiscal year 2027/28. Declining Debt Trajectory: Fitch forecasts these large primary surpluses will reduce general government debt GDP to 66.3% of GDP in fiscal year 2025/26 from 70.8% this fiscal year. Debt is expected to fall to 63.5% in fiscal 2026/2027, putting it on track to meet the government's debt target, although the 60% target is still higher than the current 'BB' median of 55.6%. Stable Policy Framework: Jamaica has remained committed to an economic policy framework built on two key pillars: Bank of Jamaica's (BoJ) inflation-targeting monetary policy and fiscal policy anchored on debt reduction targets. The policy framework proved flexible enough to cope with the recent shocks without undermining medium-term fiscal and inflation expectations. The government has built a record of fiscal prudence that has gained credibility in recent years and may be further strengthened over the next several years, including through the successful implementation of the new fiscal commission. Parliamentary elections are due by September 2025. However, there is broad economic policy consensus across the two main political parties. Fitch therefore does not expect significant policy deviations, no matter the outcome of the elections. Inflation Falls to Target: Inflation fell to 5%, the midpoint of the BOJ's target range, at year-end 2024. The BoJ has enhanced its credibility over the last four years since gaining full independence in 2021 by hiking policy rates proactively, by a cumulative 650 basis points, when inflation began to spike in late 2021. However, the monetary policy transmission mechanism is constrained by the high concentration of the banking system that only passes policy rate moves to deposit and lending rates slowly. Inflation began to move toward its target range in July 2024, allowing the bank to begin cutting its policy rate by 100 bp in 2H24. Hurricane Impacted Growth in 2024: Jamaica faced a 3.5% GDP decline in 3Q24 yoy due in large part to the damages caused by Hurricane Beryl in July 2024. A tropical storm and continuous rains further dented growth in 4Q24 with growth falling a further 0.7%. Adverse weather especially hurt the agriculture and construction sectors. The mining sector also suffered as damages to the ports halted exports of alumina. The key tourism sector also fell marginally due in part to capacity constraints from airlift. Fitch estimates that growth fell 0.7% in 2024 overall. Fitch forecasts real growth to rebound to 2.5% in 2025 and 1.7% in 2026, in line with its medium-term potential rate (around 1%-2%), which is particularly weak relative to its rating peers. Resilient External Sector: Jamaica's current account moved to a surplus position in 2023, reaching 2.9% of GDP. Fitch estimates that the surplus narrowed to 1.3% of GDP in 2024, and Fitch expects it to continue to narrow in 2025-26 but remain in a small surplus position. Foreign direct investment is expected to average close to 3% of GDP as well. While the current account balance contains a large trade deficit, it is offset by a tourism-driven services surplus and a large surplus on secondary incomes, consisting mainly of remittances from the diaspora. Improving External Balance Sheet: Jamaica's external balance sheet has continued to improve. Net sovereign external debt is forecast to fall to below 10% of GDP this year from a high of 41.6% in FY 2015/2016 because of deleveraging and a significant buildup in international reserves. Official net international reserves increased by nearly USD825 million in 2024 to USD5.6 billion by year-end. Jamaica has no need to issue external foreign-currency debt on the global financial markets given its fiscal surplus and low external maturities. Sound Banking Sector: The banking sector is well capitalized, and non-performing loans remained at low levels. As of September 2024, the capital adequacy ratio was 14.5%, well above the regulatory requirement of 10%, and the NPL ratio was 2.4%, below the five-year pre-pandemic average. ESG - Governance: Jamaica has an ESG Relevance Score (RS) of '5[+]' for both Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption. These scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in Fitch's proprietary Sovereign Rating Model. Jamaica has a medium WBGI ranking at 56.4, reflecting a recent track record of peaceful political transitions, a moderate level of rights for participation in the political process, moderate institutional capacity, established rule of law and a moderate level of corruption. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Public Finances: Slower than expected fall in debt/GDP due to fiscal loosening or a large economic shock; - Macro/Public Finances/External: An external shock that weakens growth, public finances and/or external liquidity such as a natural disaster or sharp fall in tourism. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Public Finances: Continued decline in the government debt-to-GDP ratio and interest burden that brings the debt burden closer to the peer median; - Macro/External: Evidence of improved growth potential and/or enhanced resilience of economic growth to weather shocks. Sovereign Rating Model (SRM) and Qualitative Overlay (QO) Fitch's proprietary SRM assigns Jamaica a score equivalent to a rating of 'BB-' on the Long-Term Foreign-Currency (LT FC) IDR scale. Fitch's sovereign rating committee did not adjust the output from the SRM to arrive at the final LT FC IDR. Fitch's SRM is the agency's proprietary multiple regression rating model that employs 18 variables based on three-year centered averages, including one year of forecasts, to produce a score equivalent to a LT FC IDR. Fitch's QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within its criteria that are not fully quantifiable and/or not fully reflected in the SRM. Country Ceiling The Country Ceiling for Jamaica is 'BB', 1 notch above the LT FC IDR. This reflects moderate constraints and incentives, relative to the IDR, against capital or exchange controls being imposed that would prevent or significantly impede the private sector from converting local currency into foreign currency and transferring the proceeds to non-resident creditors to service debt payments. Fitch's Country Ceiling Model produced a starting point uplift of +1 notch above the IDR. Fitch's rating committee did not apply a qualitative adjustment to the model result. ESG Considerations Jamaica has an ESG Relevance Score of '5[+]' for Political Stability and Rights as World Bank Governance Indicators have the highest weight in Fitch's SRM and are therefore highly relevant to the rating and a key rating driver with a high weight. As Jamaica has a percentile rank above 50 for the respective Governance Indicator, this has a positive impact on the credit profile. Jamaica has an ESG Relevance Score of '5[+]' for Rule of Law, Institutional & Regulatory Quality and Control of Corruption as World Bank Governance Indicators have the highest weight in Fitch's SRM and are therefore highly relevant to the rating and are a key rating driver with a high weight. As Jamaica has a percentile rank above 50 for the respective Governance Indicators, this has a positive impact on the credit profile. Jamaica has an ESG Relevance Score of '4[+]'for Human Rights and Political Freedoms as the Voice and Accountability pillar of the World Bank Governance Indicators is relevant to the rating and a rating driver. As Jamaica has a percentile rank above 50 for the respective Governance Indicator, this has a positive impact on the credit profile. Jamaica has an ESG Relevance Score of '4' for Creditor Rights as willingness to service and repay debt is relevant to the rating and is a rating driver for Jamaica as for all sovereigns. As Jamaica restructured its public debt in 2013, this has a negative impact on the credit profile. The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Prior ----------- ------ ----- Jamaica LT IDR BB- Affirmed BB- ST IDR B Affirmed B LC LT IDR BB- Affirmed BB- LC ST IDR B Affirmed B Country Ceiling BB Affirmed BB senior unsecured LT BB- Affirmed BB- JAMAICA: Producer Prices for Mining & Quarrying Dipped 1.2% in Jan. ------------------------------------------------------------------- RJR News reports that the Statistical Institute of Jamaica (STATIN) is reporting that producer prices for the mining and quarrying sector dipped by 1.2% during the month of January this year, but climbed by 7.5% for the 12-month period from January 2024 to 2025. STATIN is also reporting that the prices of producers in the manufacturing sector climbed by 0.5% in January and 0.8% during the 12-month period January 2024 to January 2025, according to RJR News. About Jamaica Jamaica is an island country situated in the Caribbean Sea. Jamaica is an upper-middle income country with an economy heavily dependent on tourism. Other major sectors of the Jamaican economy include agriculture, mining, manufacturing, petroleum refining, financial and insurance services. In October 2023, Moody's upgraded the Government of Jamaica's long-term issuer and senior unsecured ratings to B1 from B2, and senior unsecured shelf rating to (P)B1 from (P)B2. The outlook has been changed to positive from stable. In September 2023, S&P Global Ratings raised its long-term foreign and local currency sovereign credit ratings on Jamaica to 'BB-' from 'B+', and affirmed its short-term foreign and local currency sovereign credit ratings at 'B', with a stable outlook. In September 2024, S&P affirmed 'BB-/B' sovereign ratings on Jamaica and revised outlook to positive. In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is Stable. =========== M E X I C O =========== MEXICO: Trump Sows More Uncertainty About Tariffs ------------------------------------------------- RJR News reports that United States President Donald Trump raised hopes for another month-long pause on steep new tariffs on imports from Mexico and Canada, saying they could take effect on April 2, and floated a 25% "reciprocal" tariff on European cars and other goods. But a White House official said Trump's previous March 4 deadline for the 25% tariffs on Mexican and Canadian goods remained in effect "as of this moment," pending his review of Mexican and Canadian actions to secure their borders and halt the flow of migrants and opioid fentanyl into the U.S., according to RJR News. Trump sowed confusion during his first cabinet meeting on when he was asked about the timing for the start of the duties for Canada and Mexico and replied that it would be April 2, the report notes. "I have to tell you that, you know, on April 2, I was going to do it on April 1," Trump said. "But I'm a little bit superstitious, I made it April 2, the tariffs go on. Not all of them but a lot of them," the report relays. Trump's comments prompted jumps in the value of the Canadian dollar and Mexican peso versus the greenback, the report discloses. Canada's Innovation Minister, Francois-Philippe Champagne, told reporters that Canada would wait for signed executive orders from Trump before reacting, the report adds. ===================== P U E R T O R I C O ===================== BMF INC: Seeks to Hire Hector Eduardo Pedrosa Luna as Counsel ------------------------------------------------------------- BMF, Inc. seeks approval from the U.S. Bankruptcy Court for the District of Puerto Rico to hire The Law Offices of Hector Eduardo Pedrosa Luna as its attorney. The firm will render these services: a. prepare bankruptcy schedules, pleadings, applications and conduct examinations incidental to any related proceedings or to the administration of the bankruptcy case; b. develop the relationship of the status of the Debtor to the claims of creditors in the bankruptcy case; c. advise the Debtor of its rights, duties and obligations as Debtor operating under Chapter 11 of the Bankruptcy Code; d. take any and all other necessary action incident to the proper preservation and administration of the Chapter 11 case; and e. advise and assist the Debtor in the formation and preservation of a plan pursuant to Chapter 11 of the Bankruptcy Code, the disclosure statement, and any and all matter related thereto. Hector Eduardo Pedrosa Luna will be paid at the hourly rate of $175. The Debtor paid the firm a retainer in the amount of $6,000. It will also be reimbursed for reasonable out-of-pocket expenses incurred. Hector Eduardo Pedrosa Luna, partner of The Law Offices of Hector Eduardo Pedrosa Luna, assured the Court that the firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code and does not represent any interest adverse to the Debtor and its estates. The firm can be reached at: Hector Eduardo Pedrosa Luna, Esq. THE LAW OFFICES OF HECTOR EDUARDO PEDROSA LUNA P.O. Box 9023963 San Juan, PR 00902-3963 Tel: (787) 920-7983 Fax: (787) 754-1109 Email: hectorpedrosa@gmail.com About BMF, Inc. BMF, Inc. is primarily involved in the manufacturing of beverages. BMF, Inc. filed its voluntary petition for relief under Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No. 24-00356) on January 30, 2025, listing $1 million to $10 million on both assets and liabilities. The petition was signed by Andrew Bert Foti-Tallenger as CEO. Judge Edward A Godoy presides over the case. Hector Eduardo Pedrosa Luna, Esq. at The Law Offices of Hector Eduardo Pedrosa Luna represents the Debtor as counsel. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2025. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. 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